5/27/2018 Green Mountain Coffee Roasters - Expenditure Cycle II

1/3

Green Mountain Coffee Roasters, Inc.

Payroll and Fixed Asset Systems(Prepared by Christina Brown, LehighUniversity)

Company BackgroundGreen Mountain Coffee Roasters, Inc., wasfounded in 1981 and began as a small cafein Waitsfield, Vermont, roasting and servingpremium coffee on the premises. Green Moun-tain blends and distributes coffee to a varietyof customers, including cafes, delis, and restau-rants, and currently has about 6,700 customer

accounts reaching states across the nation. Asthe company has grown, several beverageshave been added to their product line, includ-ing signature blends, light and heavy roasts,decaffeinated coffee and teas, and herbal teas.Green Mountain Coffee Roasters, Inc., hasbeen publicly traded since 1993 and had salesin excess of $84 million for the fiscal yearended September 2007.

Green Mountain Coffee has a warehouseand manufacturing plant located in Wilton,

Vermont, where it presently employees 250full- and part-time workers. The company re-ceives its beans in bulk from a select groupof distributors located across the world, withtheir largest supplier being Columbia BeansCo. Green Mountain Coffee also sells acces-sories that complement their products, includ-ing mugs, thermoses, and coffee containersthat they purchase from their supplier Cof-fee Lovers, Inc. In addition to selling coffeeand accessories, Green Mountain uses paperproducts such as coffee bags, coffee cups, and

stirrers to distribute to their customers andpackage the coffee that they purchase fromSave the Trees, Inc.

Payroll SystemIn the Green Mountain production depart-ments, each worker records the numberof hours they have worked on a time cardeach day. The supervisor, Toni Holland, is

5/27/2018 Green Mountain Coffee Roasters - Expenditure Cycle II

2/3

responsible for watching employees clockin and sending the time cards to the payrolldepartment. Using a stand-alone microcom-puter, the payroll department clerk inputs thetime cards to prepare hard copies of the pay-

checks and post to employee records. The timecards are filed in payroll, and the employeechecks are given to Toni to review and dis-tribute. The payroll department also preparesthree copies of a payroll register. Copies oneand two are sent to AP and the general ledgerdepartment, respectively, and the third copyis filed in payroll. AP uses the payroll regis-ter to write a check for the imprest account.One copy of the check is signed and sent tothe bank, and the other copy is filed. The gen-eral ledger department clerk inputs the pay-roll register information into a stand-alonemicrocomputer to post to the payroll clearingaccount and update the general ledger controlaccounts. The payroll register is then filed.

Fixed Asset SystemAsset acquisition begins when the depart-mental manager (the user) recognizes theneed to obtain a new or replace an existingfixed asset. The user prepares two copies ofa purchase requisition, filing one copy in

the user department and sending one copyto the purchasing department. The purchas-ing department uses the purchase requisi-tion to prepare three copies of a purchaseorder. One is sent copy of the purchase or-der is sent to the supplier, one is sent to theAP department, and the last copy is filed inpurchasing with the purchase requisition.AP receives the goods along with an invoiceand a packing slip from the vendor. TheAP clerk reconciles the purchase order sent

from purchasing on a stand-alone micro-computer with the packing slip and invoice.The clerk uses the information to post a li-ability, update the purchases journal, andprint hard copies of the journal voucher andcash disbursements voucher.

The journal voucher is sent to the generalledger department, and the cash disbursementsvoucher is sent to the cash disbursements de-partment with the suppliers invoice. The re-

maining documents, the purchase order andthe packing slip, are filed in AP. The cashdisbursements clerk uses a stand-alone mi-crocomputer to prepare and post a check tothe check register using the information con-

tained in the suppliers invoice and the cashdisbursements voucher. The clerk then printsa hard copy of the check to send to the ven-dor. The cash disbursements voucher is thensent to the general ledger department.

The user department manager handles theasset maintenance and disposal. The manageradjusts the fixed asset subsidiary accountbalances as the assets depreciate over timeand when an asset has reached the end of itsuseful life (in which case a disposal report is

prepared). The user sends a summary to thegeneral ledger. The general ledger depart-ment clerk reconciles the cash disbursementsvoucher, the journal voucher, and the fixedasset summary from the user with a stand-alonemicrocomputer, posts to the general ledgeraccounts, and files the remaining documents.

Required:a. Create a data flow diagram of the current

system.

b. Create a document flowchart of the exist-ing system.

c. Analyze the internal control weaknesses inthe system. Model your response accord-ing to the six categories of physical controlactivities specified in SAS 78.

d. Prepare a system flowchart of a redesignedcomputer-based system that resolves thecontrol weaknesses you identified.

5/27/2018 Green Mountain Coffee Roasters - Expenditure Cycle II

3/3